Registration and Compliance Requirement of NGO’S
Written by Manish Sharma & Shubham Verma Dt. July 15th, 2022
What is Ngo
NGO (Non-Government Organisation) refers to the body which is engaged in the social cause and welfare of the society. These organisations remains detached from the Government. It may be noted that the purpose and intent of these organisations is not to work with any profit motive. However, they may have some profit making activity provided any income or surplus is applied for charitable or religious purpose. The term NGO by its name refers to the organisation that seeks charitable funds and utilise the same towards the well being and advancement of the society.
An NGO can either be registered as
- A Trust,
- A Society or
- A Section 8 Company
Section 3 in The Indian Trusts Act, 1882
Trust is a type of organisation which is formed as per the Indian Trust Act, 1982(herein after referred as the Act). As per the Act “trust” is an obligation annexed to the ownership of property, and arising reposed in and accepted by the owner, out of a confidence or declared and accepted by him, for the benefit of another, or of another and the owner.
Documents Required for Trust Registration in India
- Proof related to Identity for Trustor & Trustee such as Aadhaar Card, Voter ID, Passport, Driving licence, PAN (Note: documents should be self attested).
- Address Proof related to Registered Office such as Copy of Certificate of Property/Utility Bills.
- No objection certification from the Landlord if the property is rented.
- Trust Deed on Proper Stamp Value.
- Trust deed must reflect the following information:
- Trust deed’s objective
- Number of trustees
- Trust registered address
- Proposed name of trust
- Proposed Rules that will govern the trust
Step-by-Step Procedure for Registering a Trust in India
Step 1. Select an appropriate Name for the Trust: The first step in the formation of trust is the name selection for the proposed trust.
Step 2. Determine the number of the trustees: While formation of the Trust determination of the trustees is must. There should be at least two trustees to commence the trust.
Step 3. Drafting of Trust Deed
Contents of a Trust Deed:
- Acceptance of Funds
- Power of the Trustees
- Amount lend to the borrower.
- Details of the property.
- Name of the parties – borrower, lender, and the trustee.
- Date of the agreement and the maturity date.
- Requirements of the deed.
- Legal provisions to follow in case of the default.
- Accounts & Audit
- Winding Up
- Any other details that borrower, lender and the trustee may want
Step 4. Register with sub-registrar: For registration of the trust deed, trustees and author of the trust must be present before the sub registrar office along with 2 witnesses. Properly attested copy of trust deed along with the registration fees required at the time of registration.
Step 5.Application for PAN and TAN: While Trust registration, apply for PAN and TAN of the trust thereafter apply for bank account.
Registration under section 12AB (earlier 12AA of the Income Tax Act, 1961)
Step-1: Log in to Income Tax India E-Filing Portal using login ID and password
Step-2: Navigate to “Income Tax Forms” under E-File tab and select Form 10A/ 10AB, as the case may be
Step-3: Select the option “Prepare and submit online” to fill requisite details in the form
Step-4: Attach the required document along with Form 10A/10AB
Step-5: Submit the form using digital signatures or EVC
Step-6: On receipt of application in Form No. 10A or 10AB, as the case may be, the PCIT or CIT shall process the application within the prescribed time limit.
In case the applicant is already registered u/s 12AA or in case of provisional registration, where Form No. 10A has been submitted by the applicant. Order granting registration shall be granted in writing in Form No. 10AC. A 16-digit Unique Registration Number (URN) shall be allotted after successful registration.
In cases where Form No. 10AB has been filed, order granting registration or rejection or cancellation shall be in Form No. 10AD
Time Limit for Registration under various circumstances:
|Sub-clause of clause (ac) of section 12A(1)||Category of Entity||Time limit for filing application for registration||Applicable Form||Time limit for passing order|
|1.||Trusts or institutions which are registered under section 12AB and the period of the said registration is due to expire||Atleast 6 months before the expiry of the said period||Form 10AB||Within 6 months from the end of the month in which the application was received|
|2.||Newly formed trusts or institutions which have been granted provisional registration under section 12AB (Trusts opting for provisional to final registration for 5 years)||Atleast 6 months before the expiry of the provisional registration or within 6 months of commencement of its activities, whichever is earlier||Form 10AB||Within 6 months from the end of the month in which the application was received|
|3.||Trusts or institutions whose registration has become inoperative due to first proviso to section 11(7) of the Act. Registration u/s 12A or 12AA shall become inoperative from the date on which the trust is granted registration u/s 10(23C)||Atleast 6months before the commencement of the assessment year from which the said registration is sought to be made operative||Form 10AB||Within 6 months from the end of the month in which the application was received|
|4.||Trusts or institutions which has adopted or undertaken modifications of the objects which do not adhere the conditions of registration||Within a period of 30 days from the date of adoption or modification||Form 10AB||Within 6 months from the end of the month in which the application was received|
Validity period of registration under section 12AB:
The validity for registration u/s 12 AB is 5 years. However a provisional registration shall be granted for 3 years.
Compliance Requirement under Income Tax:
- Audit of Accounts:As per section 12A(1)(b) of Income Tax Act, where the total income of the trust as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount (i.e. 2,50,000) which is not chargeable to income-tax in any previous year, the accounts of the trust for that year are required to be audited in form 10B.
- Filing of Income Tax Return: The Trust is required to file ITR -7 every year.
- Reporting of Foreign Contributions: Every Trust which receive the foreign contribution in the previous year shall be required to submit a report, duly signed by Chartered Accountant which is accompanied by an Income and Expenditure account, receipt and payment account, Balance sheet and annual account statement of separate account maintained to receive foreign contribution within 9 months of the closure of the financial year, to the Secretary, Ministry of Home Affairs, Government of India, New Delhi. A ‘Nil’ Report needs to be submitted if no such contribution is received during the last financial year.
- Filing of TDS return and issuance of TDS certificates: Every Trust whether private or public requires to file TDS return when TDS is deducted as per provision of Act.
- Filing of Form 10BD and issue Form 10BE: Every trust who received donation whether in the form of Corpus, Specific grant, other shall require to file form 10BD showing party name from which donation received along with unique identity of the donor and amount of donation. It includes donation received from the companies in compliance to “Corporate Social responsibility”. The trusts are required to file form 10BD on or before 31st May of subsequent financial year.
What is Society
A society is formed when group of person come together with a common purpose. A society is registered under Societies Act, 1860.
Requirement of minimum members
Minimum 7 members are required to form a Society
All the compliances of a trust as per the provision of the Income tax Act are same and applicable to a Society except the following:
Registration process of Society
- Selection of name: The very first step is to determine the name of society.
- Memorandum of Association: The Memorandum of Association of the society along with Rules & Regulations of society must be signed by every establishing member, witness by Gazetted Officer, Notary Public, Chartered Accountant, Oath Commissioner, Advocate, Magistrate first-class or Chartered Accountant with their official stamping and complete address.
- Register with Sub-Registrar: The following document has to be prepared and submitted with registrar office.
- Copy of Memorandum of Association of society along with certified copy
- copy of Rules & Regulations of society along with duplicate copy duly signed by all establishing members
- Address proof of registered office of society as well as no-objection certificate (NOC) issued by landlord.
- Affidavit avowed by secretary or president of society declaring relationship among subscribers
Section 8 Company
Section 8 Company referred to as a company which is registered as a Non-Profit Organisation (NPO) which has motive of promoting education, charity, sports, research, social welfare, religion and using the profit incurred for promoting these objectives.
Incorporation of a Section 8 Company
Companies Act deals with the incorporation of Section 8 Company. An application in Form No. INC-12 has to be submitted along with the below mentioned documents to the Registrar of Companies:
- Form No. INC-13: Draft Memorandum of Association (MOA) and Articles of association (AOA) of the company in Form No. INC – 13
- Form No. INC-14 : A declaration( on stamp paper & notarized by an Advocate, a Company Secretary, a Chartered Accountant or a Cost Accountant, practicing the profession) that the Draft MOA and AOA are in compliance with the provisions of Section 8.
- Form No. INC-15 – A declaration in Form no. INC-15 on stamp paper & notarized by each member of the company who is applying.
Section 8 Company can also be incorporated using the form Spice +, in part A of form- reserve the name followed by part B. License No. shall be provided to section 8 company during the incorporation.
Tax Compliance for Section 8 Companies
Section 8 Company shall pay Corporate Tax as per Income Tax Act. Further, Section 8 Company can avail exemption from certain income if it fulfils the following compliances:
- Section 8 companies must be registered under Section 12A of the Income Tax Act, using form 10A/ 10 AB (as applicable).
- To the conditions mentioned it must fulfilin the Section 11 (if the company wants to avail the benefits of the exemption.)
- The companymust approveSection 80G through Form 10A/10AB (as applicable).
Following are the list of mandatory compliances for Section 8 Company
- Appointment of Auditor
- Maintaining Registers
- Maintenance of Financial Statements
- Preparing Director’s Report
- Income Tax Return Filing
- Conduct Board Meeting
- Conduct Annual General Meeting
- Filing of Financial Return With ROC
Manish Sharma & Shubham Verma
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